Menards pushes ‘bigger is better’ approach

An excavator and a Bobcat work to remove sections of wall from the exterior of the Menards store in Golden Valley. Arnt Construction of Hugo completed most major structural demolition of the store by April 4. (Photo: Matt M. Johnson)

Golden Valley megastore will be twice as big as nearby competitors

If NASCAR team owner John Menard lined up in a monster truck at the pole for next week’s Aaron’s 312 at Talladega, he’d be pursuing the same strategy he uses with his Menards home improvement stores.

This week Menards, the nation’s third-largest home improvement retail chain, finished demolishing its 128,000-square-foot store in Golden Valley. By next spring, a new Menards twice that size will open in its place. The mega-Menards also will be twice the size of the two Home Depot stores and the Lowe’s store located within five miles of its Interstate 394 location.

Even as the residential construction market continues to languish, Menards is likely making a push to be as big as Home Depot and Lowe’s in the Midwest market, according to industry experts. What the Wisconsin-basedprivate company lacks in U.S. market penetration, it’s trying to make up for with store size in its own backyard. The Golden Valley store will be the third mega-Menards in the Twin Cities metro area and the second built in two years.

While Menards’ $7 billion in annual revenue is a fraction ofHome Depot’s $71 billion and Lowe’s $47 billion, it is a big regional player with 258 stores, said David Brennan, co-director for the Institute of Retailing Excellence at the University of St. Thomas.

“I suspect what Menards is doing in this case is one-upmanship in regards to Home Depot and Lowe’s,” Brennan said. “John Menard is showing a disposition that in his desire to compete, he is willing to tear down a store and build a bigger one.”

No. 3 in the market

The big-store strategy won’t make Menards a national player overnight, said George John, chairman of the marketing department in the Carlson School of Management at the University of Minnesota. But it will keep the company a close No. 3 in the home improvement market.

“Menards is showing they can go toe-to-toe with these guys, at least in their home area,” John said.

Menards isn’t giving out many specifics about the new Golden Valley store. A Menards spokesman, Jeff Abbott, said the store will be similar in size and layout to the two-story Menards stores built in Eden Prairie last year and in St. Paul in 2004.

The 140 Menards employees working in Golden Valley are assigned to duties elsewhere in the chain. Most will return to the new store, Abbott said. Menards may also hire additional staff members for the Golden Valley location.

“Our logic says yes, but this is yet to be determined,” Abbott wrote in an email.

Menards has yet to file a building permit with Golden Valley or to go out to bid on the store project. Since the store will be virtually identical to the Eden Prairie Menards, a store walk-through and a peek at that location’s permitting file tells the tale.

According to Eden Prairie city documents, the store measures 261,580 square feet. The two-story structure, also built on a site where Menards razed an older store, has every conceivable home improvement department under one roof. Customers use two freight-sized, glassed-in elevators and two moving walkways that climb from one floor to the next at a slight incline.

Representatives from Home Depot and Lowe’s characterize Menards’ store growth as being good for the market. Neither company plans to change its marketing strategy for the Twin Cities area in response to the Menards foray into bigger stores.

“In a particular market, competition is good for the customer and good for overall business,” said Jen King, a Home Depot spokeswoman.

A Lowe’s representative, Karen Cobb, said her company thinks competing on pricing is the best way to succeed in the home improvement retail market. Both Lowe’s and Home Depot guarantee they will match any competitor’s price – and discount it by 10 percent.

“We feel like competition is good for customers because they are going to vote with their pocketbooks,” she said.

Chasing pros and amateurs

Menards is following the trend for its section of the retail industry, according to Brennan and John. While general merchandise retailers Wal-Mart and Minneapolis-based Target Corp. are building smaller-footprint stores, John said, Menards and its competitors are putting up warehouse locations that capture trade from both professional contractors and do-it-yourselfers.

“They’re betting customer shopping habits are changing,” John said. “It’s a blurring of the DIY and contracting channels.”

In this market, there may not be any such thing as too much density. Brennan said having so many big-box home improvement stores in the Interstate 394/494 corridor will draw consumers from a larger area, creating an economy of scale.

“People will shop multiple stores to get the best price and to get exactly what they need,” he said.

The new Menards is being built in a mixed-use zone in Golden Valley. The city planning director, Mark Grimes, said that while the zone was created to foster sustainable development and attractive commercial design, the city chose to accommodate the Menards rebuild.

“If it was a new store coming in, we would have had more concerns,” he said. “Menards is something we like to see in Golden Valley.”

Bids for construction

Next for the store will be something akin to the pole fight between the NASCAR teams that Menards, Home Depot and Lowe’s sponsor – the construction bid process.

Mike Campobasso, vice president for business development at Kraus-Anderson Construction Co. in Minneapolis, said he expects the project to go out for bids in about a week. Kraus-Anderson built the St. Paul Midway Menards megastore in 2004.

Also a contender for the construction contract will be Doran Construction of Bloomington. The company built six Menards stores over the past few years, including the Eden Prairie location.

Last year, Finance & Commerce reported that the cost to build the Eden Prairie store was $6 million. Abbott, the Menards spokesman, declined to discuss the construction budget for the Golden Valley store.